The Dumpster Fire of Illinois Public Pensions is Still Smoldering

[beowulf]

[QUOTE=ERD50;2200235]

At least in IL, the problem is that adequate contributions were not made when they needed to be made (many years ago). The correct thing would have been to make those contributions, and raise taxes at that time. In that way, the voting public would have a say in it at least. I suspect that the public would have shot down the increases, and when they realized it was required to fund these pensions, they would have asked for pension reform back then. Or accepted a cut in services, or a combo.

ERD50-

I guess where you live in Illinois, the public gets to vote on state and/or local budgets. I know of no state that allows the public to directly vote on a state budget (CA with their tax limit is a different story - they still don't get to vote on each budget). Not sure about counties and cities/towns. In VA, no one ever gets to vote on a specific budget. You elect your representatives and they vote. I think that's true of most jurisdictions. So exactly how would the public shoot down tax increases? By voting in new reps at the next election cycle?

In the interests of cutting down on reposts, I left out the part where you make an analogy to paying for pensions years after the employee was promised them being the same as being asked to pay more for a TV years after it was bought. Both you and I know that's a totally invalid and ridiculous comparison. In one case you are talking about raising the price of an item after receipt and in the other you are referring to a contractual agreement (promise) to pay benefits as part of a wage package. The fact that taxes may have to be raised or services cut has no nexus to your TV example.

I've locked horns with you several times on this issue and you seem to have an intractable belief that pensions for current employees and retirees should be cut prior to raising taxes or cutting services. I don't have a problem with changing pension benefits for new or employees that have only worked a short time, but I do not understand your animosity towards the pensions of current employees and retirees. It's as if you were burned by this in a private company and want to share your pain, or that you just don't like public employees.

[rk911]

Quote:

Originally Posted by Chuckanut ...Nobody ever offered me a big pay raise In my last year or two so as to spike my pension....

that practice *officially* ended years ago

[rk911]

Quote:

Originally Posted by beowulf .... I don't have a problem with changing pension benefits for new or employees that have only worked a short time, but I do not understand your animosity towards the pensions of current employees and retirees. It's as if you were burned by this in a private company and want to share your pain, or that you just don't like public employees.

the problem in illinois is that the state constitution prohibits any reduction in retirement benefits. that’s the gist of the wording, not the precise text. i seem to recall a measure passing one or both chambers a few years baxj that would switch new employees to a defined contribution plan from a defined benefit plan but the state supremes rulled uh-uh. so the hole continues to grow.

[H2ODude]

Quote:

Originally Posted by Chuckanut I realize that in a discussion of the Illinois pension problems my situation doesn’t count for much since I did not retire from Illinois. Nobody ever offered me a big pay raise In my last year or two so as to spike my pension. [emoji33] I offer my experience only to show that other states don’t follow the Illinois way of doing things.

+1

My local gov pension is administered through the state and is pretty well funded. What bugs me, not for my sake because I never thought I'd stay anywhere long enough to get a pension so did my own thing, is the fact there has been no COLA adjustments as promised. I've been retired 8 years with none; preceding there were some up to 9%. So there were a lot of folks in the lower ranks who've gotten no increase in that time and I can only imagine it is pretty tough on them. Then I compare that to one city I worked for where it's a guaranteed 3% annually, and that's not even for police and fire.

Anyway, the point is that this stuff varies all over the place and some of the resentments seem a tad off the mark. It al just emphasizes that some politicians (the root issue) are just corrupt, ignorant, or only care about being re-elected. Or all three.

[ripper1]

Quote:

Originally Posted by ERD50 I only read Spanky's post as a discussion of possible solutions, I did not read it as a personal attack against people with public pensions. So if you read my post in that context, I don't think I am being dismissive at all, and certainly not "rudely". I might even say that you are being dismissive of Spanky's viewpoints. Isn't he entitled to his view, and to discuss it here? He's just acknowledging that those people may not like to hear that "medicine". We are often told that we just need to pay taxes for these public pensions, when our pensions have PBGC limits - is that rude? Just my opinion. -ERD50

Too bad the Supreme Court said they have to follow the language of the constitution that cannot diminish or impair pensions. It's not the employees fault that the legislators took pension holidays and did not provide the proper level of contributions while the employees provided their 9% every pay check. [mod edit]

[rk911]

my illinois public pension is increased annually by 3% of the original amount. so if original pension was $1000 p/m the annual increase for the life of the pension would be $30. but my pension system (IMRF) pays out a 13th payment each July. the $ amount varies each year which is calculated after the June 1 pensions are processed in late May. The amount of the 13th payment is based on:

1. How much IMRF receives in employer contributions from a special assessment (.62%) on all IMRF employer!s payrolls, and

2. The total amount of all June 1st payments to everyone eligible for the 13th payment.

IMRF divides the first number by the second number.

the amount of the 13th payment, originally a compromise when a compounded 3% COLA was rejected by the legislature (but approved for most other Illinois public pension systems) has dwindled since first introduced in the early 90’s. IMRF reports that when first introduced the 13th payment was ~90% of the regular amount. in 2018 the 13th payment was ~28%. IMRF attributes this to more and more IMRF-covered employees retiring.

while a 3% compounded COLA would definitely be nice i saw an item online that reported ~25% of Illinois’ public pension debt is due to the 3% compounded COLA most of the other Illinois public pension systems provide to their retirees.

https://www.imrf.org/cmsmedia/files/multi-site-files/tax%20and%20topic%20letters/tl19.pdf

[Rianne]

58 former Illiinois state lawmakers collect 6 figure pensions. Why is it a surprise to anyone, that the people who make the laws also collect the pensions?

https://www.illinoispolicy.org/58-fo...gure-pensions/

[steelyman]

There’s an Illinois-focused podcast called “State Week in Review” that may interest those who react to this thread and several similar threads that pop up from time to time. The Illinois budget/legislature and pensions are frequent topics:

https://itunes.apple.com/us/podcast/...156670974?mt=2

[rk911]

the new illinois governor has stated he wants to see a graduated income tax which reportedly would require a change in the state constitution. i’m guessing if he’s sucessful in getting legislation or a constitutional convention the pols will tinker with more than a change to the state income tax.

Illinois Constitution

[Rianne]

Quote:

Originally Posted by steelyman There’s an Illinois-focused podcast called “State Week in Review” that may interest those who react to this thread and several similar threads that pop up from time to time. The Illinois budget/legislature and pensions are frequent topics: https://itunes.apple.com/us/podcast/...156670974?mt=2

I record all the state discussions, interviews etc. I view these podcasts/programs as therapy for the lawmakers. They examine their ideals, dreams and fantasy while shaming past political decisions and wrongdoing. We the people (The People of Illinois-a singular statement) sit and watch, agree/disagree, like/dislike, vote for/against, campaign/cold call/canvass-volunteer for the "savior" and hope for change.

Well, the solution is between a rock and a hard place. IMHO.

[Rianne]

Quote:

Originally Posted by rk911 the new illinois governor has stated he wants to see s graduated income tax which reportedly would require a change in the state constitution. i’m guessing if he’s sucessful in getting legislation or a constitutional convention the pols will tinker with more than a change to the state income tax. Illinois Constitution

Correct. SS will be taxed and retirement income will be taxed. Currently it is not. Actually, I think that's OK. Heard on one of my state podcasts, it will bring in @ $2B. That will help, but we have a long way to go.

[ripper1]

Too bad it will never happen with the Daley's off Illinois and their ilk that have 200k, 300k pensions.

[Rianne]

Quote:

Originally Posted by ripper1 Too bad it will never happen with the Daley's off Illinois and their ilk that have 200k, 300k pensions.

Really? Daley is the only devil in this? Now that's naive.

[Ronstar]

Quote:

Originally Posted by Rianne Correct. SS will be taxed and retirement income will be taxed. Currently it is not. Actually, I think that's OK. Heard on one of my state podcasts, it will bring in @ $2B. That will help, but we have a long way to go.

$2B? Really? How many retired Illinois residents are going to stay in Illinois once their SS and retirement income is taxed?

[Rianne]

Quote:

Originally Posted by Ronstar $2B? Really? How many retired Illinois residents are going to stay in Illinois once their SS and retirement income is taxed?

It was an estimate given by a nonpartisan think tank. I only listen, I try not to judge.

[Ronstar]

Quote:

Originally Posted by Rianne It was an estimate given by a nonpartisan think tank. I only listen, I try not to judge.

I understand. But it’s typical of politicians to do the math of taking number of tax payers times tax equals revenue. But they never consider the fact that a lot of the taxpayers will leave. More than 100,000 people left last year alone.

[steelyman]

Quote:

Originally Posted by Ronstar $2B? Really? How many retired Illinois residents are going to stay in Illinois once their SS and retirement income is taxed?

I'm a former Illinois resident who moved to a state where retirement income is taxed (in 2019 5.25% flat tax, I think). The move was motivated not by tax concerns but for a change of scene. So now I pay state taxes, but not to Illinois.

[ripper1]

Quote:

Originally Posted by Rianne Really? Daley is the only devil in this? Now that's naive.

And the like. Look up the word....ilk.

[Rianne]

Quote:

Originally Posted by ripper1 And the like. Look up the word....ilk.

I apologize. Arthur Berman - Jim Edgar - James Thompson and thousands more are part of that ilk.

[ERD50]

Quote:

Originally Posted by beowulf Quote: Originally Posted by ERD50 At least in IL, the problem is that adequate contributions were not made when they needed to be made (many years ago). The correct thing would have been to make those contributions, and raise taxes at that time. In that way, the voting public would have a say in it at least. I suspect that the public would have shot down the increases, and when they realized it was required to fund these pensions, they would have asked for pension reform back then. Or accepted a cut in services, or a combo. ERD50- I guess where you live in Illinois, the public gets to vote on state and/or local budgets. I know of no state that allows the public to directly vote on a state budget (CA with their tax limit is a different story - they still don't get to vote on each budget). Not sure about counties and cities/towns. In VA, no one ever gets to vote on a specific budget. You elect your representatives and they vote. I think that's true of most jurisdictions. So exactly how would the public shoot down tax increases? By voting in new reps at the next election cycle? ....

Yes. Or more likely, as politicians started talking about the tax increases needed to support these pensions, there would have been discussions. There would be a bright light on the issue. More people would have viewed the public pensions as far more generous than their private pensions (if they got one at all), and maybe they would have called out for changes for new employees. If that was done way back, we might have avoided this problem and never had to deal with the possibility of not keeping promises already made.

And in fact, future pensions in IL have been modified recently. My DD started her teaching career in the year they made the shift, so she is in the new, less generous plan. But for IL, it appears to be too little, too late. It didn't need to be that way.

Quote:

Originally Posted by beowulf ... In the interests of cutting down on reposts, I left out the part where you make an analogy to paying for pensions years after the employee was promised them being the same as being asked to pay more for a TV years after it was bought. Both you and I know that's a totally invalid and ridiculous comparison. In one case you are talking about raising the price of an item after receipt and in the other you are referring to a contractual agreement (promise) to pay benefits as part of a wage package. The fact that taxes may have to be raised or services cut has no nexus to your TV example. ....

No, I stand by that analogy. The promises needed to be paid for in real time, not kicked down the road, and then present the bill to the taxpayers decades later.

In my TV analogy, if that company had included the R&D in their price, you either accept it, buy from a competitor, maybe buy a cheaper model, or do without. But you make that decision at the time, not decades later.

Quote:

Originally Posted by beowulf ... I've locked horns with you several times on this issue and you seem to have an intractable belief that pensions for current employees and retirees should be cut prior to raising taxes or cutting services. I don't have a problem with changing pension benefits for new or employees that have only worked a short time, but I do not understand your animosity towards the pensions of current employees and retirees. It's as if you were burned by this in a private company and want to share your pain, or that you just don't like public employees.

Well you completely misstate/misunderstand my position then.

" an intractable belief that pensions for current employees and retirees should be cut prior to raising taxes or cutting services." - Did I ever say that? All I'm doing is pointing out the realities. Don't shoot the messenger. Don't put words in my mouth.

And I can accept a tax increase, and/or a cut in services - if they are accompanied by some 'fixes' for the pension costs'. Those are the decisions we need to make. It doesn't need to be all/nothing.

Some background: If a person has a private pension, and their company becomes insolvent, the private pensioner is subject to limits in benefits. And they paid into an insurance policy (PBGC fund) to help protect those benefits to some extent.

Do you know how PBGC benefits limits work? There is a cap on the benefits paid from PBGC. So the little/mid guys are not hurt, but those with larger pensions are capped. That still sucks for the guy who earned that pension, but that is real life. The cap is currently ~ $67,000 if you were 65 when the PBGC took over.

SS is predicting cuts to everyone.

So it just seems fair to me to ask for a similar cap for public employees. It's a tough pill to swallow to ask private citizens to keep paying more and more in taxes, to fund promises that come without the kind of limits that those citizens are subject to.

Is that really such an unreasonable view?

Please don't think I'm being callous here. I think that if we take reasonable steps, and face reality, we can soften the blow for people. It might take a little "tough love" to help in the long run. I'd rather see adjustments made to help make the system sustainable. Yes, that will create some pain. But I think that is more compassionate than what might happen otherwise, where people suddenly have the rug pulled out from under them if IL pension fund just goes dry.

People are fleeing IL. That reduces the tax base. I haven't found data on the profile of those leaving, but by most accounts it is higher income people on average, as they have the most options. So that is a double-whammy on the IL tax base. And then, taxes will need to be raised on the remaining people. Rinse/repeat. A constitutional requirement to pay these pensions unimpeded won't mean squat if there is no money.

And yes, the public pension people need to take some responsibility. Where was their Union when IL was not contributing to the pension fund? I suspect they were quiet for the reasons I outlined - they did not want to draw attention to the costs of these pensions. Instead, they relied on the constitutional provision. And, constitutions can be amended. Just like I should be aware of the risks to my private pension and plan accordingly, these people should have been aware of the risks to their IL public pension, and plan accordingly. When they saw it was not being funded, did they take action? They are more closely in control of their Union leaders, than I am of my elected officials.

In addition, many of these pensioners do not pay into, or collect from SS. IL pols got their fingers in the whole pie. So the pensioners should have been even more diligent in tracking their pension system, as they had no SS backup.

-ERD50